Tuesday, December 06, 2011

In June of 2010, after months of querying, I had two offers of agent representation in-hand for my romantic comedy, THE FROG PRINCE. One was from my “dream agent” who represented several New York Times bestsellers. Although the second offer was from an agent from a newer, smaller agency, I found her enthusiasm attractive. In the end, and for various reasons which aren’t worth going into here, I chose to pass on both offers.

Which, of course, left me right back where I was before I’d ever queried anyone: unpublished and depressed as hell about it.

Regular readers of Joe’s blog will be familiar with how Boyd Morrison leveraged his indie-publishing success into a four-book, traditional publishing deal with Simon & Schuster [link to post here: http://jakonrath.blogspot.com/2010/05/ark-by-boyd-morrison.html]. Boyd and I had been friends since the first Thrillerfest in Phoenix in 2006 (insufferable inferno of a bar, anyone?), and he called me in July of last year, suggesting that I consider uploading THE FROG PRINCE to Amazon for the Kindle.

Here’s the problem: All that stuff a publisher normally does for you–designing a book cover, marketing, formatting a manuscript for e-publication across several platforms—is now your job. Graphic designing not a part of your skill set? Too bad. Those who can’t do either hire or learn on the fly.

Which is what I did. I designed a passably professional book cover. I formatted the manuscript for the Kindle Digital Text Platform, asking for help when I ran into problems. (One memorable text to Boyd contained words I never thought I’d use in a million years: “Did you find that you had to convert your ms. to HTML and edit the tags directly in order to fix the formatting errors for the DTP?”)

THE FROG PRINCE went live on Amazon in August 2010. I priced it at $2.99, not so much because I understood the nuances of the various pricing arguments bouncing around the indie-pub blogosphere at the time, but because I sincerely doubted that anyone would pay anything more. In fact, I was doubtful anyone would even pay $2.99.

That particular misgiving seemed spot-on; for the entire month of August, THE FROG PRINCE sold exactly 18 copies. The story was essentially the same for September when I sold 70 copies.

And then two things happened at about the same time.

The first revelation took place at the beginning of October. While skimming various Kindle reader forums, I ran across a thread on the topic of pricing. One reader wrote that she never bought a book that was $2.99 or less because it was sure to be self-published “indie crap” riddled with typos.

The second occurred on October 10th of last year when a reader posted a five-star review for THE FROG PRINCE, writing: “The book description was a little strange, inbred insanity and impotency and all but for $2.99 I figured I'd give it a try given the high ratings by the others. In the end I would have paid full price for this [emphasis mine].” Of course, the mercenary portion of my little author brain perked right up at those eleven words.

These two things got me to thinking a bit more about what my pricing was saying to potential readers of my novel. I thought I was conveying the message “Give this book a shot! At $2.99 what do you have to lose?” Instead, I think I had inadvertently turned my Amazon page into the equivalent of a dubious used-car lot, with blinking neon lights screaming “SALE, SALE SALE! EVERYTHING MUST GO!”

This got me to thinking about coffee. No, seriously.

Consider what Starbuck’s has done for coffee. I am not a coffee connoisseur, and I could probably count the number of times I’ve been in a Starbuck’s on one hand (let’s face it, I’m never going to say with any measure of confidence: “Yeah, I’d like an antibacterial ricin-berry latte with a squirt of methadone and a splash of yak milk.”).

But you don’t have to know coffee to understand how Starbuck’s took full advantage of the economic concept of “imputed value.” Strictly defined, imputed value is “the worth or value of a given asset that is not recorded or documented in existing historical records, although that value is considered to be inherent in the asset.”

Still awake? Yeah, that was a total snore, but I can easily boil that dreary explanation down to the more familiar, oft-heard expression: “Why in the hell would anyone pay six dollars for a cup of coffee?”

Why indeed.

People may grumble about parting with their six dollars, but they’re unlikely to grumble about the coffee. Why? Because at six dollars, customers assume they’re getting one high-class cup o’ joe. At six dollars, they want it to taste good. And if it doesn’t? Well, they’re more likely to convince themselves that it does. After all, who spends six dollars on something that tastes like crap? Throw in the peer pressure of “everyone else seems to like their six dollar cup of crappy coffee just fine,” and you have an impressive marketing strategy on your hands.

Starbuck’s entire business model is built on the concept of imputed value. Should indie authors be doing the same?

Consider this: In mid-October I raised the price of THE FROG PRINCE to $3.99. I immediately saw a jump in sales. And when I say immediate, I mean overnight. Within a few days the book had leap-frogged for the first time onto two Amazon Top 100 lists. And even though half of the month had already passed, I sold 158 copies for the month of October.

At the beginning of November, I raised the price to $4.99. In November I sold 224 copies. I raised it again to $5.99 at the beginning of December, and that’s when the whole thing began to pick up steam.

December: 472 copies

January: 857

February: 862

March: 867

April: 746

May: 799

Keep in mind that by December I was charging $5.99 per book and keeping $4.19 per book. In January my royalties on Amazon alone were close to $3,500. Now, these aren’t New York Times best-seller numbers, but they’re comfortable, mid-list bestseller numbers.

Here’s what else they are: Day Job Quitting Numbers. I made $3,200 a month after taxes as a clinical research administrator. By January, my book royalties from Amazon began to approach the net monthly salary from my Day Job (but keep in mind that you have to pay royalty taxes on book royalties). And those totals do not include sales on Barnes & Noble, Smashwords, or any of the other digital reader platforms, nor do they include paperback sales through CreateSpace.

I recently took an extended leave of absence from my Day Job to finish a second novel. I never returned.

In June I was feeling confident enough to experiment with pricing a little more. Halfway through the month I lowered the price to $2.99 and then to $0.99. Did I sell more books? Yes, I did. My June total was 1,024 books sold. However–and this is an important “however”–I lost money. As you may be aware, Amazon royalties are 70% for the author at books priced $2.99 and up. Anything priced less than $2.99 and the author receives only 35%.

Now, you could argue that more books sold will create a larger pool for the “word of mouth” that you hope will spread the news of your great read. And for authors with a large back list–those who are able to put out many titles simultaneously–that strategy is certainly one worth taking a look at because they have the advantage of volume. For authors with only one book (and who are also balancing the dreaded Day Job), pricing at $0.99 may be giving the impression that your work has no value.

Something else intriguing that I noticed when I lowered the price on FROG PRINCE to $0.99 was the way it affected the reviews and refunds. Up until that point, about two percent of customers who purchased THE FROG PRINCE returned the book for a refund. One, two, or three-star reviews were very uncommon. When I dropped the price, the refund rate went to almost zero, and the number of negative reviews (between one and three stars) went up.

Here’s what I suspect was happening: At $5.99 you just bought the literary equivalent of a cup of Starbuck’s coffee. Your customer wants to like it. After all, they’ve read the reviews and it looks like everyone else liked it, right? If they get through the first few chapters and begin to suspect that the book just isn’t for them, they’re very likely to return it for a refund. Hey, six dollars is six dollars. And if they do like it, they want to jump on the review bandwagon and let everyone else know just how much they liked it.

At $0.99, the reader isn’t as heavily “invested” in your novel. If they didn’t like it, they may not bother to return it to get their dollar back. Instead they’ll find their way to your review page and let you have it by way of a negative review.

For authors with one book, it’s worth considering creating “imputed value” first with higher pricing. With a decent novel, this will “prime the pump” with positive reviews from readers who are invested and who want to like your book. This in turn will lead to more sales.

My second novel, the romantic suspense SLEEPING BEAUTY, came out on Amazon for the Kindle in September, just as sales of FROG started to drop. My religious/historical thriller VIRGIN comes out December 6th. Today I lowered my price on all three novels to $4.99, because 1) I no longer have to create “imputed value” because FROG PRINCE has almost 50 reviews; 2) with sales of FROG PRINCE now leveling off (something not unexpected) I anticipate that the sales of SLEEPING BEAUTY and VIRGIN will fill the revenue gap.

Indeed, SLEEPING BEAUTY sold 183 copies during the month of September, something it took FROG PRINCE over three months to do. The numbers for SLEEPING BEAUTY for October and November were 199 and 291 respectively, a steady climb that continues to outpace what FROG PRINCE sold three months after its release.

I may not be making millions of dollars, but I am making a living doing what I love, which is all I ever wanted to do. Over a year on this journey and I’ve only now begun to think about shifting my strategy from “creating imputed value” to “creating a large fan base to market future novels to.”

And for those of you who will no doubt ask–yes, I believe I could leverage my sales record for THE FROG PRINCE and SLEEPING BEAUTY into a traditional publishing deal. In fact, I have already been approached by several “big agents.” I could write a whole other blog post about why, but suffice to say that at this time, a traditional publishing deal is not attractive to me for reasons that Joe has covered again and again in his posts over the last two years. (And for those of you who will no doubt ask—yes, it is a little satisfying to be the one to say “thanks, but no thanks…”)

I've also come to the conclusion, based on my own research and that of my peers', that ebooks can make more money at $3.99 or $4.99 than at $2.99. So at the beginning of this month, I raised prices on Kindle six of my titles, going as high as $4.49.

But I ran into a snag. Because the prices had not gone into effect on Smashwords, Amazon didn't raise my prices. They simply stated my new price then discounted them back to the original price. I don't know which price I'm earning royalties on, the higher one or the discount, but I'm guessing it is the discount.

Then contrast that with STIRRED. Last Sunday, Stirred was the Kindle Daily Deal, and the price was lowered to 99 cents and hit #1. STIRRED sold more ebooks in one day than TIMECASTER (published by Berkely) has sold in both ebook and paperback since June.

So what's more important, units sold or money in the bank?

I'd say money.

If I sold 10,000 copies of an ebook at 99 cents and a 35% royalty rate, that earns me $3500.

But I can sell 3000 copies of an ebook at $2.99 and a 70% royalty rate, and earn $6000.

Or I can sell 2500 copies at $3.99 and 70%, and earn $7000.

It really seems like higher prices is the way to go.

"But Joe," you're probably saying, "if I raise my prices then my sales rank will get higher due to fewer sales, and I may drop off bestseller lists, making me harder to find."

I dunno. Maybe you won't drop off the bestseller lists. Maybe, like Elle, it will help you get on some bestseller lists.

I do know one thing for certain: Kindles and ereaders are selling like crazy, Which means authors can make a lot of money, even at higher rankings.

A $2.99 ebook ranked at 600 might have earned an author $2000 a month back in April. But now an ebook ranked at 1800 can earn $2000 a month. So many ebooks are selling that our rankings can be poorer even though our profit is higher.

I say: Experiment with raising your prices. Unless you've got a runaway bestseller at 99 cents (or even if you do), chances are you'll make more money at a higher price. I'm not saying gouge the reader and charge $12.99, but $3.99 or $4.99 seems reasonable.

Try it for a month, then report back with your results. This obsession with rank and bestseller lists is silly. Sales rank, or being on a bestseller list, doesn't pay the bills. Making money does. And while it may take time to find the sweet spot between price and sales, unless you try for yourself you are potentially leaving money on the table. The market has shown it can bear prices up to $14.99. We need to show a little guts and start pricing higher.